In this case the Southern Sun Hotel rented its premises from Mohamed’s Leisure Holdings (MLH).
The agreement between the parties stated that the rent is due before the 7th of each month. The tenant’s bank was responsible for automatically making payment of the rent via an electronic system. Due to changes in the bank’s internal payment processes, the rental amount was paid late. MLH immediately placed the tenant on terms for the late payment. It also stated that should such a breach occur again, the lease agreement will be cancelled.
Thereafter the rent was paid late again due to the system issue on the bank’s side and the landlord cancelled the lease and requested the tenant to vacate the premises. The tenant argued that the cancellation was unreasonable since the non-payment was not due to their fault, but the bank’s.
In deciding this matter, the court weighed up two legal principles i.e. considerations of public policy and fairness and the pacta sunt servanda principle, which states that agreements must be honoured. The court held that the parties were in a relatively equal position as to their bargaining power and could have negotiated regarding a notice period before cancellation, but the responsibility to pay the rent on time ultimately lies with the tenant (the hotel), who failed to comply with its obligations. The court found in favour of the landlord and evicted the hotel. It was held that just because a contractual term operates harshly and is unfair, does not lead to it being invalid.